Semi-Retirement Made Earlier and Easier

Is Crowdfunding Worth A Closer Look?

I first got to know about the idea of crowdfunding a few years ago after stumbling on this article at Mr Money Mustache (MMM). Looking at the ~10% annualised returns MMM received from participating in lending campaigns with The Lending Club, it did get me interested to find out more.

Traditionally, banks receive deposits from savers and provide loans to individuals or businesses at higher rates. Looking at how big banks have become, money lending can indeed be very lucrative. As they become bigger, the margins or spread have to be higher to support and maintain profits.

In this low-interest climate, depositors are receiving negligible interests from their deposits. At the same time, if a borrower is unable to obtain a bank loan, the alternative is to approach a private money lender with significantly higher rates or even a loanshark.

And I guess this is where crowdfunding companies come in. Largely operating as middlemen marrying potential lenders with potential borrowers, they can take a smaller slice of the spread since they are more efficient, nimble and asset-light. This means that lenders can have a higher return and borrowers can borrow at potentially lower rates.

Attitude Towards Crowdfunding

As with something new, there is always an element of skepticism. After all, many stock market investors are struggling to achieve a 10% annualised return. At least, I know I am. :p

It’s also inevitable that most of us are likely to dismiss crowdfunding as a tool to grow our money when we have very little knowledge of how it works. Hands up if you already knew everything I have said so far?

A Crowdfunding Guide

Therefore, BIGScribe has actually put together a resource to help you understand crowdfunding better.

Besides inviting 4 companies in Singapore to share their perspectives on crowdfunding, BIGScribe actually managed to interview 2 bloggers, Jun from Let’s Crowd Smarter and Chris Ng from Growing your Tree of Prosperity. They have actually participated in a few lending campaigns and their experiences would be a useful read if you are interested in becoming a lender.